Where a discharge under a state insol vency law is obtained, it does not discharge the debt of a non-resident creditor who re fuses to prove its claim in such proceedings ; Bergner & Engel Brewing Co. v. Dreyfus, 172 Mass. 154, 51 N. E. 531, 70 Am. St. Rep. 251.
Insolvency may of course be simple or no torious. Simple insolvency is attended by no badge of notoriety. Notorious or legal insolvency, with which the law has to do, is designated by some public act or legal pro ceeding. This is the situation of a person who has done some notorious act to divest himself of all his property: as, making an assignment, applying for relief, or having been proceeded against in invitum under bankrupt or insolvent laws ; Bish. Insolv. Debt. 3, n.; Thelusson v. Smith, 2 Wheat. (U. S.) 396, 4 L. Ed. 271; 7 Toullier, n. 45 ; Do mat, liv. 4, tit. 5, nn. 1, 2 ; 2 Bell, Com. 165.
It is with regard to the latter that the insolvency laws (so called) are operative. They are generally statutory provisions by which the property of the debtor is surren dered for his debts ; and upon this condi tion, and the assent of a certain proportion of his creditors, he is discharged from all further liabilities ; Bartlet v. Prince, 9 Mass. 431; Otis v. Warren, 16 Mass. 53 ; 2 Kent 321; Ingr. Insolv. 9. This legal insolvency may exist without actual inability to pay one's debts when the debtor's estate is final ly settled and wound up. (See definition). Insolvency, according to some of the state statutes, may be of two kinds, voluntary and involuntary. The latter is called the pro ceeding against the creditor in invitum. Vol untary insolvency, which is the more com mon, is the case in which the debtor insti tutes the proceedings, and is desirous of availing himself of the insolvent laws, and petitions for that purpose.
Involuntary insolvency is where the pro ceedings are instituted by the creditors in invition,, and so the debtor forced into in solvency. The circumstances entitling either debtor or creditors to invoke the aid of the insolvent law are in a measure peculiar to each state. But their general characteristics are as follows: Proceedings by creditors may usually be taken for fraudulent concealment, convey ance, or collusive attachment, of property ; by petition in the designated tribunal, on no tice to the debtor ; possession of the proper ty is taken by an officer of the courts, usually after proof of the allegations, and a meeting of creditors is called for the choice of an as signee by a vote of creditors, having relation both to number and amount. The assignee
becomes practically the owner, in trust, with power to wind up the estate ; he acts under the general direction of the court, calling meetings of creditors when required. The right to a discharge varies in different states, in some being conditioned upon payment of a certain percentage or the assent of the ma jority of creditors or upon more stringent conditions in case of subsequent insolvency. The statutes vary as to the grounds of re fusing a discharge for fraud, as in cases of paying or securing debts within a certain time before the application, or when the debt or is insolvent, or has reasonable cause to be lieve himself so. As to all these. details the state statutes should be referred to.
As to American and English bankrupt law proper, see BANKRUPT LAWS; BANKRUPT.
The English act 34 Geo. III. ch. 69, was called an insolvent debtor's act ; but the first insolvency act properly so called was passed in 1826. The act of 7 & 8 Viet. cap. 70, called "an act for facilitating arrangements between debtor and creditor," is prop erly an insolvency law. This provided for the dis charge of a non-trading debtor if he bad a certain concurrence from his creditors. This was one-third, both in value and number, to the initiatory steps. To the discharge, a proportional consent at an in itiatory meeting, and, finally, the consent of three eighths In both number and value, or nine-tenths in value of creditors to the sum of twenty pounds and upwards.
Many of the states have laws for the distribution of insolvent estates, and also laws for the relief of poor debtors. These are not properly called in solvent laws In the sense In which we have used the words,—though the latter relieve the debtor's body from restraint upon a surrender of his goods and estate, and leave his future acquisitions still liable. See POOR DEBTORS.